Sainsbury’s will throw light on price war cost

Sainsbury’s sales have held their ground in the supermarket price war, but the company will reveal on Wednesday how much damage discounting has inflicted on its profits.

The UK’s third largest supermarket chain, which has more than 1,000 stores, has been outperforming the grocery market in recent months, helped by its guarantee to match rivals on price.

Its strong growth has been underpinned by the rapid expansion of its Local convenience store network, while it claimed to have become the second biggest online grocer after sales increased by 20 per cent to 165,000 a week.

The latest figures from Kantar Worldpanel confirm its strong growth, with sales up 5.4 per cent in the 12 weeks to April 15, indicating that it has outperformed the supermarket sector, which grew at five per cent as a result of rising food prices.

The City forecasts that pre-tax profits will rise five per cent to £701m in the year to the end of March, in a slowdown on the nine per cent growth a year ago.

Sainsbury’s profits will also have been hit by investment in its ambitious convenience store opening programme, designed to capitalise on the growth for local top-up shopping as soaring petrol prices cause people to make fewer trips to out-of-town supermarkets.

With Leeds-based Asda having turned up the pressure by guaranteeing to be 10 per cent cheaper than rivals and Tesco threatening to up its game by revamping its Big Price Drop to include more promotions, there are fears that Sainsbury’s is exposed to an escalation in the price war. However, Sainsbury’s could benefit from sales of party food around the Diamond Jubilee and the Olympics.